04. Nevada Hotel Partnership

SITUATION:

This partnership organization owned and managed several secondary tier hotels near
the Las Vegas strip. Due to the recent economic downturn, two of the client's hotels
(Major International Hotel Flag), were struggling with the severe devaluations seen
not only across the national commercial real estate market, but more specifically
across the hospitality sector. Additionally, sales revenues significantly declined as a
result of a diminished supply of tourists and recreational travelers in 2009-2010.

The hotels' owners faced increasing cash flow problems due to low market room
rates and decreasing occupancy since late 2008. Furthermore, the drop in
commercial property values in Las Vegas in 2008-2009 made any hopes of securing
adequate refinancing unrealistic. To further compound the issues, the principals were
obligated by personal guarantees on the notes for each hotel.

Over 2009-2010, the recession yielded a dramatic decrease in tourism and
recreational spending—the major driving forces behind revenues in recreational
destinations such as Las Vegas. This resulted in the hotels being unable to continue
meeting debt service requirements on their mortgages. Consequently, the loans fell
into payment default and were tracked toward foreclosure.

Within a matter of weeks, the lender had coordinated foreclosure proceedings. The
principals who had signed personal guarantees on each of the notes were facing
substantial liability.

Contemporaneously with their foreclosure actions, the special servicer also decided
to sell the mortgage notes at auction. The borrowers still saw great, long-term
potential for these assets and were not prepared to lose them.

WHAT WAS DONE:

The Team was retained by the hotel's ownership organization to intervene and
secure a solution with the lender through a discounted purchase of the mortgage
note. The Team was able to negotiate a collective discounted payoff agreement
between borrowers and the lender.

The Team's previous dealings with the lender and experience with the auction
administrative proceedings provided valuable insight with respect to an acceptable
bid level for the auction proceedings. The Team was able to correctly advise the
clients with respect to the lowest amount necessary to secure possession of their
hotels through the closed auction.

This acceptance of a discounted payoff resulted in an end to the foreclosure. The
current borrowers were not only able to purchase the notes on both franchised hotels
at a significant discount, but they also saved in excess of $3 million on fees,
penalties, and the amount recoverable via the personal guarantees.

Shortly after the close of the auction, the owners secured possession of their Las Vegas Hotels. They saved over $3 million, in fees, penalties and personal
guarantees. Ownership was now on track to maintain their franchise flags, stabilize
their properties, and restore positive cash flows in the years to come. The Team's
effective communication, insight and credible relationships with both the lender and
auction agents helped the borrower to avoid the liabilities of an over-valued debt
level on an under-valued property.

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